The financial implications of expat divorce can be far reaching. In this case study, we discuss the steps taken to resolve the financial complexities faced by a divorcing US expat couple in Israel. We’ll talk about what expat divorce is, the challenges faced, and how these issues were resolved.
Before we get started, we have written many blogs on expat wealth management topics. Please take a moment to peruse our series on Moving to Israel, if this is of interest to you or anyone you may know.
Checklist for moving to Israel
Expat divorce: a case study
As we begin our discussion, let’s define a key term: expat divorce.
What is an expat divorce?
An expat divorce is defined as a marital separation that occurs between two people who formerly resided in one country, but either intend to relocate to another or have already done so. Many times, expat divorces come with legal and jurisdictional issues that complicate matters immensely.
The subject of our Expat divorce case study is a married couple, two US citizens living in Israel, who were getting divorced.
- The financial assets were in the United States, including 401(k) plans of the husband in his name.
- They also had some IRA accounts at one of the large custodians, who was not willing to assist with the asset split without the couple being physically present in the US.
- The husband had also changed his name after moving to Israel.
The challenges:
There were several issues this divorcing expat couple faced. The most significant one was the fact that the US custodian that held their IRA accounts was requiring them to be physically present in the US in order to transfer the accounts to a new custodian.
Also, if the husband were to withdraw the assets from the 401k directly to split them up, they would have had to deal with a Qualified Domestic Relations Order (QDRO), which would likely be an expensive and time-consuming process supervised by a US court.
How the divorce between these two expats was resolved
As a financial advisor for expats, we are familiar with the financial complications that can result from such situations We took the following steps to resolve the situation:
- Once the husband changed his name, we established a new IRA for him at our custodian bank.
- Nardis Advisors was able to rollover the husband’s 401(k) plan into the IRA, considering the name change too. The move to the IRA allowed the couple to avoid the lengthy and expensive QDRO process in US courts.
- Our custodian is more flexible in allowing the expat divorcing couple to execute account changes from overseas – as opposed to other US wealth management institutions who do not permit this.
- Once the divorce decree was signed and approved by the Israeli court, we submitted a translated version to our custodian, who split the IRA assets according to the directives noted in the divorce decree. We then transferred the wife’s portion of the assets into her new IRA.
And…there is one less technical item.
The couple’s spiritual advisor, who was guiding them through the divorce process called Nardis Advisors to see where things stood. We filled him on how things would work procedurally, and that both husband and wife were cooperating with us fully to affect the desired outcome. We believe that this allowed them to approach the situation with higher peace of mind which was of benefit to all parties involved and facilitated the resolution.
Concluding thoughts on our expat divorce case study
The implications of getting divorced while living abroad can potentially be very complicated from a legal, tax, and financial perspective. We believe it may be best handled by advisors who specialize in US expat financial advisory and planning, and who have dealt with these types of situations before.
We are a financial advisory boutique with advisors in the US and in Israel and serving expats globally. If you are moving to Israel or another country and don’t know where to start when it comes to the financial side of things, please contact us.
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Norman H. Chait, CFA, Managing Principal, Nardis Advisors LLC, April 10th, 2022
Disclaimer: Nardis Advisors LLC (“Nardis”) is a Registered Investment Advisory Firm regulated by the U.S Securities and Exchange Commission in accordance and compliance with applicable securities laws and regulations. Nardis does not render or offer to render personalized investment advice through this medium. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and Nardis.
